The government is set to scrap the provision for deduction of 10% tax at source on capital gains made by the companies and partnership firms from the fiscal year 2015-16.
The initiative to withdraw the provision was made after a number of complexities arose over collection of tax, finance ministry officials told the Dhaka Tribune.
In FY2014-15, the government slapped 10% tax at source on capital gains that custodian banks, merchant banks, financial institutions or Trading Right Entitlement Certificate (TREC)-holder companies have to deduct from the companies and partnership firms.
However, the government has failed to collect the tax till date due to unavailability of actual information on net profit of the companies.
Currently, custodian banks, merchant banks and financial institutions or Trading Right Entitlement Certificate (TREC)-holder companies have to collect information on their own on deduction of tax at source on capital gains from companies and partnership firms through ascertaining profit of the companies.
However, TREC holder companies found it difficult to implement the provisions due to procedural complexities in existing trading practices by the companies and firms.
Representatives from Bangladesh Securities and Exchange Commission, Dhaka Stock Exchange, Chittagong Stock Exchange, Association of Trading Right Entitlement Certificate, Holders and Central Depository Bangladesh Limited already had a number of meetings with finance minister and National Board of Revenue officials, demanding cancellation of the provision due to the complexity in the process.
It is almost impossible to collect necessary information including realised gain and acquisition costs if linked accounts are maintained in different places, according to market insiders.
Currently, about 9,791 companies have Beneficiary Owner’s (BO) account out of 3.2m total BO account holders. Of the number, many companies have more than one BO account with different houses.
“In most of the cases, the companies and the firms maintain either more than one BO account or linked accounts of the original one with different trading houses, which creates difficulties in information collection on realised gain and acquisition cost from different houses,” an official said.
As of FY2013-14, the companies have to pay capital gain tax at the time of submission of tax return at the year-end on the basis of their declared net profit and gain.
If scrapped, the companies will now have to pay the tax on capital gains from the stock market with their income tax returns.
